Warming aids Arctic economies but far short of "cold rush"

A fishing boat is seen near the Arctic community of Pond Inlet, Nunavut, Aug. 23, 2014. REUTERS/Chris Wattie

* Oil, shipping, tourism aid Arctic as ice melts

* But thawing permafrost may mean big hidden costs

By Alister Doyle, Environment Correspondent

OSLO, Aug 28 (Reuters) - Climate change is aiding shipping, fisheries and tourism in the Arctic but the economic gains fall short of a "cold rush" for an icy region where temperatures are rising twice as fast as the world average.

A first cruise ship will travel the icy Northwest Passage north of Canada in 2016, Iceland has unilaterally set itself mackerel quotas as stocks shift north and Greenland is experimenting with crops such as tomatoes.

Yet businesses, including oil and gas companies or mining firms looking north, face risks including that permafrost will thaw and ruin ice roads, buildings and pipelines. A melt could also cause huge damage by unlocking frozen greenhouse gases.

"There are those who think that growing strawberries in Greenland and drilling for oil in the Arctic are the new economic frontiers," said Achim Steiner, head of the U.N. Environment Programme.

"I would caution against the hypothetical bonanza that some people see," he told Reuters of Arctic regions in Russia, Nordic nations, Alaska and Canada. U.N. studies say global warming will be harmful overall with heatwaves, floods and rising seas.

More than a decade later, researchers see the Arctic as a test case for the impacts of climate change. It is warming fast because a thaw of white ice and snow exposes darker ground and water below that soak up more of the sun's heat.

"So far, I believe the benefits (of Arctic warming) outweigh the potential problems," said Oleg Anisimov, a Russian scientist who co-authored a chapter about the impacts of climate change in polar regions for a U.N. report on global warming this year.

Others say it is hard to discern benefits. Factors such as improved drilling technology or relatively high oil prices around $100 a barrel may be bigger drivers for change than a thaw in a chill, remote region shrouded in winter darkness.

Off Alaska, for instance, oil company bids for leases in the Arctic Chukchi and Beaufort seas since 2005 have totalled about $2.7 billion. But a previous round in the 1980s - before global warming was an issue - attracted similar sums, according to data from the U.S. Bureau of Ocean Energy Management.

"There are subjective interpretations of development costs and benefits (tourism, fishing, oil and gas, shipping) but it will be some years before there are enough trends and data," said Fran Ulmer, President Barack Obama's chair of the U.S. Arctic Research Commission.

Indigenous peoples doubt there are benefits. Aqqaluk Lynge, a Greenlander and ex-head of the Inuit Circumpolar Council, said vital dogsleds were useless in some areas because of the thaw.

"People think the economy is Wall Street but it's the local economy that's feeling the pressure," he said.

Among new activities, 71 cargo ships used a short-cut shipping route between the Pacific and Atlantic oceans north of Russia in 2013. Roughly the same number is likely in 2014, said Sergei Balmasov of the Northern Sea Route Information Office.

In a sign of more tourism, Crystal Cruises will send its Crystal Serenity ship from Anchorage to New York in 2016 past icebergs and polar bears north of Canada - priced from $19,755 per passenger and with an escort vessel as an ice-breaker.

CRUISES, CARGO

The route was first navigated in 1903-1906 by Norwegian explorer Roald Amundsen, but has only been ice-free in some recent years. Paul Garcia, spokesman for Crystal Cruises, said there had been a high volume of bookings so far.

Tourism has benefited in some areas. The number of nights spent by visitors to the Arctic archipelago of Svalbard north of Norway rose to 107,000 in 2013 from 24,000 in 1993.

And cod, haddock, herring and blue whiting are among fish stocks expanding north. Iceland has set new, unilateral quotas for mackerel, including almost 150,000 tonnes in 2014.

"The biomass sum of all types of species is increasing, and will continue to increase in the Arctic," said Svein Sundby, of the Institute of Marine Research in Norway.

Among oil companies, Exxon Mobil began drilling in Russia's Arctic on Aug. 9 despite Western sanctions on its Russian partner Rosneft over Ukraine crisis.

But Royal Dutch Shell dropped plans for drilling in 2014 after spending $5 billion on exploration since 2005, following protests and accidents off Alaska.

And despite any gains, a 2013 study in the journal Nature said the Arctic has a hidden economic time bomb.

A major release of methane trapped in the frozen seabed off Russia could accelerate global warming and cause $60 trillion in damage, almost the size of world GDP, it said. Costs would be from more heatwaves, floods, droughts and rising sea levels.

"The size (of drawbacks) is likely to dwarf any kind of benefits," said Chris Hope of the Judge Business School at Cambridge University, who was among the authors.

The U.N.'s panel of climate experts says that it is at least 95 percent probable that human activities are the main driver of warming since 1950. But many voters are doubtful, suspecting that natural variations are to blame. (Editing by Tom Heneghan)

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